Used Phone Market Expected To Explode

smartphones

With the many news phones that are coming out, people are wondering what the options available for their old phones. They could hold onto it, sell it on Ebay to get some money for it, or sell it on other sites for a small return. Local electronics stores, such as Best Buy, have trade up programs. But for the customer who settles for a used phone because of the lower price, that person is not alone. The used phone market is set to “explode.”

According to Toni Sacconaghi of Sanford C. Bernstein, the analysis indicates “the used smartphone market is poised to explode.” It is estimated that the market will see a growth “from 53 million to 257 million units over the next 5 years.” With these calculations, used phones will “cannibalize” 8 percent of total new smartphone sales by 2018. In 2012, the used phone sales were 3 percent.

Consumers are more aware of trade-in programs that are offered by carriers and cellphone resellers like Amazon and Gazelle, or resales on consumer marketplaces such as eBay. The NPD Group surveyed U.S. smartphone users and reported that half of them indicated they would take advantage of trade-in programs next time they upgraded. This could potentially create a change in loyalties, causing them to shift away from carriers and retailers. Apple may be offering its own trade-in program through its stores sometime in the near future.

iPhones are requested the most in the resale market. Many customers can’t afford a new Apple phone, and iPhone users trade-in and upgrade more frequently that users of other smartphones. When comparing iPhone 5 with Galaxy S4, and iPhone 4S with Galaxy S3, the Apple phones had better value. This is not just true in the U.S., but also evident from price data in China, India, and Brazil.

Used iPhones do not have to be in mint condition to be resold. Broken iPhones are also worth something when traded in. Phones that are locked to a competitor’s wireless network trade at a higher value than when locked to their own network. For example, iPhone 4 with 16 gigabytes of memory was valued at $65 if traded-in at Verizon and locked to Verizon wireless network, but the same phone traded-in at the same place but locked to At&T wireless network went for $117.

T-Mobile’s Jump plan, AT&T’s Next plan, and Verizon’s Edge are based on the importance of the high residual value of smartphones. These plans allow customers 6 to 12 months to trade in phones for upgrades. AT&T and Verizon extended the upgrade time on their traditional subsidy plans from 18 to 20 to 24 months. The value of trade-ins is influencing plans and pricing by all carriers. According to Sacconaghi, this could accelerate the cycle of smartphone replacement.

Forrest L. Rawls

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